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C D S L
Our verdict on C D S L isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
Management highlighted the continued focus on Tier 3 and Tier 4 cities as a driver for the 42% increase in registered accounts, aligning with the 'Neev@25' strategic outreach. (2 in progress, 3 met across 5 tracked commitments)
“And therefore, the true-to-label cost whilst it's a regulatory nudge is also an important part of the strategy of CDSL to ensure that there's a long-term sustainable participation by more and more new investors coming into the securities market fold and into the demat fold, so that the percentage of participation of a growing population increases from a 7%, at least 15% to 20%.”
Management confirmed that LIC integration is expected to go live in November 2025, which is the immediate next step for scaling this business. They have already signed up two new customers in the current half-year. (2 in progress, 2 met across 4 tracked commitments)
“Yes, the LIC integration is work in progress. We are expecting the integration to happen soon... We are actually betting to increase the market share in the coming quarters.”
Standalone IT costs for Q2FY25 were ₹18 crore against an operating income of ₹248 crore, representing approximately 7.2% of operating income. On a consolidated basis, IT costs were ₹24 crore against ₹359 crore total income (approx 6.7%). While slightly below the 10-12% range in percentage terms due to the massive revenue surge, the absolute spend has increased from ₹13 crore in Q2FY24. (1 met, 1 in progress, 1 revised across 3 tracked commitments)
“Second is there are newer ways on security side, on the application side, which make it easier, more seamless with AI coming in also. So, the technology has to keep in step with all these newer reforms which are coming into play also.”
The single charge mandate per SEBI circular became effective on October 1, 2024. Management noted that the impact will start appearing in the Q3 results (October-December quarter). (1 not yet due across 1 tracked commitment)
“Nehal Vora: So, the impact of the pricing cuts will start giving effect from 1st of October where single charge as per SEBI circular, we have kind of put in place.”
The effective tax rate for Q3FY26 on a standalone basis was approximately 28.3% (34 crore tax on 120 crore net profit), which is above the guided range. (1 missed across 1 tracked commitment)
“So, we've continued to maintain our policy guidance on dividend payout at 60% of our operating profits.”
See the full cited Management analysis of C D S L
How durable is the business?
The company is facing increased margin pressure due to mandatory technology and cybersecurity spends required by regulators to maintain market infrastructure stability. (1 shifted, 1 contracting)
“our PBT margin is something 58% and last year it was 61%. Quarter-on-quarter, it is even worse... technology expenses went up by almost 70% compared to the last year.”
Revenue from online data charges (KYC) grew 30% quarter-on-quarter, significantly outperforming the 14% growth in new demat accounts due to increased 'fetches' from mutual fund and existing investors. (1 expanding, 4 contracting across 2 engines)
“Online Data Charge Q3FY26: 49; Q3FY25: 56”
Transaction charges saw a notable contraction of 16.9% in the final quarter of FY25 compared to Q3, reflecting a cooling in market trading activity despite the growing account base. (3 contracting, 1 stable across 1 engine)
“Transactions Charges Q3FY26: 60; Q3FY25: 59”
While CDSL maintains a high market share, its share of incremental (new) account additions moderated to 82% from a peak of 93% in Q3 FY25, indicating increased competition. (1 contracting)
“CDSL's BO Account as on (in lakhs): 1,727... Number of Issuers: 46,271”
KYC revenue continues to face a sequential decline, now representing 13% of total consolidated revenue, primarily due to lower account opening volumes and fewer KYC fetches. (1 contracting)
“It is around 13% in the current quarter... the drop in income was primarily because of market conditions where the number of accounts were lower, which resulted in lower KYC fetches.”
See the full cited Business Model analysis of C D S L
Where does growth come from?
The insurance repository business (Centrico) is showing strong growth of 30% year-over-year, driven by new customer sign-ups and the launch of an online portal, despite a general industry decrease in policy issuance. (1 accelerating, 4 new trend across 5 signals)
“From the Insurance Repository point of view, the operating revenue has been steady. And as you typically see, Jan, Feb and March period is the crucial period. So, we are trying to capitalize on this.”
The pace of new account additions is accelerating significantly, with the most recent quarter (Q4FY24) adding 109 lakh accounts compared to 85 lakh in the previous quarter. (5 accelerating across 5 signals)
“CDSL Net A/c opened in the quarter (in lakhs) ... Q3FY26 76”
The total number of Beneficial Owner (BO) accounts has shown consistent and accelerating growth over the last five quarters, crossing the 11.5 crore milestone in 2024. (1 accelerating, 4 steady across 5 signals)
“CDSL's BO Account as on (in lakhs) ... Q3FY26 1,727”
While specific revenue figures for the insurance segment are not isolated in the charts, the consolidated 'Online Data Charges' (which includes KRA/Repository services) shows a steady trend with a peak in Q4. (2 steady, 1 decelerating, 1 accelerating across 4 signals)
“First and the largest KYC Registration Agency (KRA) in the country with over 9.95 crore KYC records.”
CDSL is significantly increasing its capacity building through technology. IT costs on a consolidated basis have risen from Rs. 12 crore in Q1FY24 to Rs. 26 crore in Q1FY25, a 116% increase to support higher volumes and security. (1 accelerating across 1 signal)
“IT Cost ... Q1FY24 12 ... Q1FY25 26”
See the full cited Future Growth analysis of C D S L
What could break the thesis?
CVL continues to hold a dominant position with 8.93 crore KYC records, but the 'Online Data Charges' revenue (KYC) fell from ₹51 crore in Q3FY25 to ₹37 crore in Q4FY25, suggesting competitive or volume pressure. (2 intensifying, 1 emerging, 1 easing, 1 stable)
“The second part is on the KRA business, you're the market leaders there. The pricing there is significantly higher than the CKYC business there. And now that the government is improving the quality of data on CKYC, do you see that as a risk for pricing or the KYC registration business overall?”
Consolidated 'Other Admin' expenses have risen to ₹54 crore in Q4FY25 from ₹52 crore in Q3FY25, showing persistent upward pressure on the cost base despite falling revenues. (5 intensifying)
“Other Admin: Q3FY25 52, Q4FY25 54, Q1FY26 57, Q2FY26 63, Q3FY26 65”
Regulatory changes regarding the definition of 'small companies' and mandates for unlisted companies to join the depository could lead to a dip in new company registrations if the scope of the mandate is narrowed. [REGULATORY]
“And also it has also been helped by the unlisted companies addition but seeing the change in regulation that has happened 1st of December, where the definition of not so small companies have been changed? So, in that context, how do you see the unlisted addition on behaving because that basically shortens the definition or in terms of scope?”
The insurance repository business is facing stagnant growth in the number of new policies being issued across the industry, limiting the potential for revenue expansion in this diversification segment. [DEMAND]
“As you would have seen the IRDA numbers, the insurance industry policy number growth has been more or less stagnant. It's not been increasing as expected.”
The pace of account openings improved sequentially, with 66 lakh accounts opened in Q2 FY26 compared to 56 lakh in Q1 FY26. Total demat accounts reached 16.5 crore, maintaining an 80% overall market share. (1 easing)
“CDSL saw more than 65 lakh accounts opened in the quarter, bringing CDSL's total number of demat accounts to 16.5 crore, maintaining our 80% market share.”
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